LA JOLLA, Calif. - Compensation and management philosophy differences are at the root of the departure of two managing directors from Pacific Corporate Group, a leading pension fund alternative investments consultant.
Michael Moy and David Graus resigned earlier this month. Mr. Moy said his decision was based on money. Mr. Graus cited the firm's management processes, but added compensation also played a role in his decision.
The two men said they have no plans to start a firm together.
Mr. Moy said he probably will explore opportunities with a general partner, sometime after his official Sept. 30 departure.
"They (general partners) have special needs, and I think I will be able to fill those needs," he said.
"Both David and I and another managing director approached Chris Bower (chief executive officer) one year ago about revising the economics of ownership within PCG," said Mr. Moy. "We were told that it wasn't going to happen."
"We were relatively unhappy about that," said Mr. Moy. "I felt I wasn't being compensated or had an ownership position that was in proportion to my role in the organization."
"For me," said Mr. Graus, "it was a balance between the two (management and compensation)."
Mr. Bower said he owns 80% of the company, and the managing directors own the 20% balance. He said his stake is large because he is the sole guarantor of the company's debt and has pledged personal assets as collateral.
The three managing directors wanted to alter the ownership structure to 25% for Mr. Bower and 75% for the managing directors, with no additional consideration, said Mr. Bower.
"It was a situation where they were firm in their position," he said.
Kelly K. DePonte, chief operating officer, and A. J. Matsuura, previously a senior vice president, are now managing directors, replacing Messrs. Moy and Graus, said Mr. Bower, who corroborated Messrs. Graus and Moy's account.
"From his (Mr. Moy's) perspective, I think he did feel he was being underpaid," said Mr. Bower. "We had a compensation study done that indicated otherwise."
In response to Messrs. Moy and Graus' proposal, PCG hired Watson Wyatt Worldwide to perform the study, Mr. Bower said, which concluded PCG's compensation is equal to or above those at similar firms.
Mr. DePonte's hiring as COO also played a role in the two men's decision. As COO he is responsible for "overseeing the deployment of resources and the management of the firm's investment process," said Mr. Bower.
The hiring caused "people to look at what their roles were going forward," said Mr. Bower.
In the search that resulted in Mr. DePonte's hiring, the firm wanted someone with a "deep background in principal investing in partnerships," said Mr. Bower. Most of the senior investment officers with PGG were "home- grown," said Mr. Bower.
Mr. DePonte was formerly vice president, treasury risk management for First Interstate Bancorp, where he managed a $170 million venture capital portfolio and invested in 15 limited partnerships.
"We had a structural change in March that made it clear how resources were going to be utilized," said Mr. Bower. "We want to be at the cutting edge of the business and have the most effective and institutional approach to investing in the business."
Still, he characterized the separation as amicable. He said he has assisted both in their search for jobs.
